SINGAPORE (Reuters) -Asian share markets held their ground near a four-year peak on Tuesday, buoyed by Wall Street's closing record high ahead of a slate of corporate earnings while investors took stock of tariff negotiations between the U.S. and its trading partners.

The Japanese markets returned to action after a holiday in the previous session following the weekend's election where the ruling coalition suffered a defeat in upper house elections, although Prime Minister Shigeru Ishiba vowed to remain in his post.

Japanese shares briefly jumped at the open before trading modestly higher, while bonds had a muted reaction as the election results were largely priced in and were not as bad as investors had feared. The yen rallied 1% on Monday, recouping some of the losses from past weeks and was last little changed at 147.46 per dollar on Tuesday.

Kristina Clifton, an economist at the Commonwealth Bank of Australia, said the weakening of Ishiba's leadership will open the door to more fiscal expansion which is negative for Japanese assets, including the yen. 

"The bottom line is longer term Japanese government bond yields and JPY can fall if concerns about Japan's fiscal spending deepen."

MSCI's broadest index of Asia-Pacific shares outside Japan hit its highest level since October 2021 in early Asian hours but was last little changed. The index is up nearly 16% this year.

Overnight, the S&P 500 and the Nasdaq notched record-high closes on Monday, lifted by Alphabet and other megacaps ahead of a burst of earnings reports this week.

Investor focus has been on tariff negotiations ahead of the August 1 deadline with the European Union exploring a broader set of possible countermeasures against the United States as prospects for an acceptable agreement with Washington fade.

The most important deals for the global outlook are with the EU and Japan, CBA's Clifton said. 

"The USD reaction to the announcement of trade deals with these countries would depend on the details of the deals in our view," Clifton said, noting the dollar could turn down again against the euro and the British pound.

The euro was steady at $1.1689, after rising 0.5% in the previous session but still away from the near four-year high it touched at the start of the month. The single currency is up 13% this year as investors look for alternatives to U.S. assets bruised by tariff uncertainties.

The dollar index measure against six other key currencies was at 97.905. [FRX/]

The rumblings around the Federal Reserve's independence and whether U.S. President Donald Trump will fire Fed Chair Jerome Powell have kept investors on tenterhooks in recent weeks.

Trump appeared near the point of trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow.

U.S. Treasury Secretary Scott Bessent on Monday said the entire Federal Reserve needed to be examined as an institution and whether it had been successful, further exacerbating worries about the independence of the U.S. central bank.

The Fed is widely expected to hold rates steady in its July meeting but might lower rates later in the year. Market focus will be squarely on Powell's speech later on Tuesday for clues about when the Fed might ease policy.

Goldman Sachs strategists expect the Fed to deliver three consecutive 25-basis-point cuts starting in September, "provided inflation expectations remain in check amidst worries about Fed independence."

In commodities, oil prices edged lower on concerns that the brewing trade war between major crude consumers the U.S. and the European Union will curb fuel demand.

Brent crude futures fell 0.35%, to $68.97 a barrel, while U.S. West Texas Intermediate crude eased 0.31% to $66.99 per barrel. [O/R]